Estate planning is not just for the wealthy. With rising property values and frozen tax thresholds, more Irish families are being caught by inheritance tax. Simple, legal steps can save your heirs hundreds of thousands.
1. The Annual Small Gift Exemption
Each individual can gift €3,000 per person per year tax-free.
- Applies to anyone (children, grandchildren, friends).
- Does not use up CAT thresholds.
- Both parents can gift separately.
Example – The O’Briens
Tom and Mary have 2 children and 4 grandchildren.
- Each parent gives €3,000 to each = €18,000 total annually.
- Over 10 years → €180,000 transferred tax-free.
- If taxed later at 33%, this saves ~€60,000.
2. Dwelling House Exemption
Allows a property to be passed completely tax-free if:
- Beneficiary lived there 3+ years before inheritance.
- They have no other property.
- They live there 6+ years after.
Example – Margaret’s Home
Margaret leaves her €500,000 home to her daughter, who has lived with her for 5 years and owns no other property. Entire home passes tax-free, saving €165,000 in CAT.
3. Section 72 Life Assurance
A life insurance policy designed to cover inheritance tax.
- Payout is exempt from tax if used for CAT liability.
- Provides liquidity so heirs don’t need to sell assets.
Example – Patrick & Eileen
Estimate their estate will leave €300,000 in tax. They buy Section 72 cover. On death, the policy pays out and clears the CAT bill, so children receive the estate intact.
Case Study – Strategic Planning in Action
Patrick and Siobhán, both 65, have €1.2m estate:
- Start annual gifting (€18,000/year).
- Transfer €500,000 home using dwelling exemption.
- Take out Section 72 insurance for €150,000.
Result: Their children inherit nearly everything tax-free, avoiding a six-figure bill.
Key Takeaway
Estate planning in Ireland isn’t optional, it’s essential. Use gifting, exemptions, and insurance to pass wealth smoothly and tax-efficiently.
